How are fleets changing?

Technology improvements and growing charging infrastructure are making electric vehicles an increasingly competitive alternative to the internal combustion engine

THE size of the global business fleet has been affected by several factors in recent years. Delivery fleets have been growing rapidly, reflecting the increase in last-mile delivery caused by pandemic lockdowns and the rise in e-commerce. Operational fleets continue to grow in line with GDP, as vehicles are used to perform established work tasks.

Professional fleets have faced growing pressure in recent years, as home-working, digitisation and functional centralisation have increased, and businesses have adopted a more holistic perspective on employee mobility (e.g. mobility-as-aservice).

Overall, the number of business vehicles – and total emissions – is expected to grow, with light commercial vehicles (LCVs) alone having increased by 21% from 2020 to 2021. Immediate action is needed if we are to meet Paris commitments.

Avoiding emissions For zero-emission targets to be hit, avoiding emissions must be the longterm priority for fleet owners. Solutions such as hydrogen fuel cell electric vehicles (FCEVs) and synthetic fuels are unlikely to play a role at scale for light-duty fleets, given their scarcity and cost. Therefore, unlike many sectors, the pathway to zero emissions for LCVs and passenger-carrying vehicles (PCVs) is clear – transition to electric vehicles (EVs).

Although EVs may not be viable in all use cases today, battery ranges are improving, costs are coming down and the number of charging points is increasing exponentially. The result of this can be seen by looking at the global EV fleet, which continues to grow.

State of fleet electrification EVs have been around since the inception of the automobile. In the early 1900s, they represented 25–30% of vehicle sales in the US, saw a resurgence in the 1960s and 1970s, and started to enter the market again at the end of the 20th century.

With each wave, EVs have been limited by cost, range concerns and inadequate infrastructure. Although many of the same challenges exist today, we have reached an inflection point in the adoption of EVs.

Technology improvements and a growing charging infrastructure base are driving increased demand, which is in turn driving investments from original equipment manufacturers. This creates a virtuous circle of improvement, which has made EVs an increasingly competitive alternative to internal combustion engine vehicles (ICEVs) – indeed more attractive in some cases.

This dynamic is reflected in the numbers, with over 11 million electric PCVs on the road globally in 2021 – a figure that has almost doubled over the past two years. This momentum is expected to continue, with 95% of survey participants stating they expect to begin bringing EVs into their fleet within the next five years.

Charging infrastructure has also scaled up significantly to support the growth in EV sales, with almost 1.8 million (fast and slow) public charging points now available globally: more than four times as many as five years ago. Investment – across both EVs and charging infrastructure – has also increased, to reach $273 billion in 2021, a 48% year-on-year improvement since 2014.

Common objections Two objections are often raised regarding the impact of EVs on net global emissions: Objection 1: EVs are no better than ICEVs, because of the negative effect of battery production on the environment.

Although the initial manufacturing footprint of an EV is higher than that of the average diesel or petrol vehicle due to the battery, EVs contribute fewer lifecycle emissions as a result of using electricity as the main energy carrier (Exhibit 3). Objection 2: EVs are no better than diesel if the electricity is generated by polluting sources.

The relative benefit of EVs is indeed diluted in countries with a high proportion of hydrocarbons in the national energy mix. However, even in scenarios in which most electricity is generated from fossil fuels – such as India, where fossil fuels constitute 90% of the national energy mix – EVs still release fewer CO2 emissions over their lifetime. For instance, looking at India and considering its current energy mix, EV CO2 emissions are still estimated to be 19–34% lower than those of ICEVs.

EVs contribute fewer lifecycle emissions as a result of using electricity as the main energy carrier

EXHIBIT 3: COMPARATIVE LIFECYCLE GREENHOUSE GAS EMISSIONS OF A MID-SIZE BEV AND ICEV

ICEV 2 42 tCO

2e1

BEV 3 21 tCO

2e1

0 10 20

tCO2e 30 40 50

VEHICLE MANUFACTURING BATTERIES – ASSEMBLY AND OTHER

BATTERIES – MINERALS ELECTRICITY FUEL CYCLE (WELL-TO-WHEEL)

1 Per vehicle lifetime, 2 – ICEV base case 3 – High GHG Minerals Case. Source: Comparative life-cycle green house gas emissions of a mid-size BEV and ICE vehicle, (2021), IEA.

Overcoming market challenges Although there are cost implications of changing vehicle types and investing in new infrastructure, some senior stakeholders will understand and prioritise the broader benefits for their business and society in decarbonisation decision-making.

However, other stakeholders will not, relying solely on unit economics to determine their assessment. Procurement limitations such as this can lead to the appearance that the EV transition business case is less viable, or more expensive, than it could be.

It is important to identify all major drivers of cost across the life of the vehicle. Although EVs may look more expensive initially, the total cost of ownership (TCO) may be lower when considering fuel, maintenance taxes and tolls.

The value of these cost drivers will vary by market, vehicle class, duty cycle and scale of purchase; however, in some cases, the TCO for EVs has already reached parity with ICEVs.

Over time, this business case is expected to become increasingly compelling, as vehicle production volumes grow, the cost of batteries decreases, and governments become increasingly restrictive around highemitting vehicles.

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Common misconceptions/ challenges fleet owners need to overcome

• Thinking transitioning to electric vehicles is the only way to decarbonise a fleet, meaning other quick wins such as fleet optimisation are missed. • Not considering how the organisation (i.e. people, processes and IT) will handle decarbonisation changes, meaning progress is halted. • Assuming EVs aren’t applicable to most of their fleet vehicles, meaning targets and decarbonisation opportunities may be missed. • Overlooking hidden costs, leading to halting progress, or unnecessary cost later. • Waiting until there is absolute certainty in the approach and business case, meaning targets and decarbonisation opportunities may be missed. • Not utilising monitoring solutions, such as telematics, to track and report impact of new decarbonisation initiatives on greenhouse gas emission changes.